Gross profit increased to $2.0 million, an increase of 40% from 2011. The gross profit percentage increased to 30% of sales, an increase from 28% in 2011.

Earnings before non-cash items and finance costs (modified EBITDA) increased to $268,000 during 2011, as compared to $31,000 in the prior year period. (See EBITDA table at end of this release for further non-GAAP information).

Net loss for 2012 was $124,000, or $0.01 per share, compared to a loss of $365,000 a year earlier.

Working capital at March 31, 2012 was $2.6 million, as compared to $2.7 million at December 31, 2011.

The Company also announced that the credit limit on their revolving line of credit has been increased from $3 million to $4 million, effective May 11, 2012.

Operational Highlights:

Expanded distribution into Michigan and Tennessee markets.

Entered into an enhanced distribution partnership with largest distributor, UNFI.

Gained entry into Spartan stores (estimated 70 to start) based out of Grand Rapids, MI.

DECA Military approves authorization of Reed’s/Virgil’s skus to be sold in commissaries across the US. Product to be sold in by Reed’s current DSD network.

Continued upgrading Los Angeles plant to increase capacity and efficiency.

“This is our 10th quarter in a row of double-digit growth,” stated Chris Reed, Founder, Chairman and CEO of Reed’s, Inc. “We are pleased with the continued, strong, top-line revenue growth on our brands and private label. We are also excited by the results of our margin improvement program started in the fourth quarter of 2011. Significant increases in both revenues and gross profit margins are pushing us quickly to profitability.”

James Linesch, Chief Financial Officer, stated, “Our overall working capital is sufficient for our current business expansion and is anticipated to increase through cash positive operations. Our drop in cash to $101,000 at March 31, 2012, with an additional $213,000 available, is largely due to a buildup of certain inventory items and a short term increase in our receivables. We are focusing on inventory reductions by planning our productions closer to our sales. We have reduced our inventory levels by more than $500,000 since quarter-end, and we anticipate further reductions in the months ahead. Along with an increased limit on our revolving line of credit, we believe that we will not require additional capital to carry out our current business plans for 2012.”

The Company will conduct a conference call @ 4:15PM EDT on Monday, May 14th to discuss its 2012 first quarter results and outlook for the remainder of 2012. To participate in the call, please dial the following number 5 to 10 minutes prior to the scheduled call time (866) 240-5139. International callers should dial (713) 481-0091.

Reed’s, Inc. makes the top-selling natural sodas in the natural foods industry sold in over 13,000 natural food markets and supermarkets nationwide. Its six award-winning non-alcoholic Ginger Brews are unique in the beverage industry, being brewed, not manufactured and using fresh ginger, spices and fruits in a brewing process that predates commercial soft drinks. The Company owns the top-selling root beer line in natural foods, the Virgil’s Root Beer product line, and the top-selling cola line in natural foods, the China Cola product line.

Other product lines include: Reed’s Ginger Candies and Reed’s Ginger Ice Creams. In 2009, Reed’s started producing private label natural beverages for select national chains. Reed’s products are sold through specialty gourmet and natural food stores, mainstream supermarket chains, retail stores and restaurants nationwide, and in Canada, as well as through private label relationships with major supermarket chains.

For more information about Reed’s, please visit the Company’s website at: http://www.reedsinc.com or call 800-99-REEDS.

Some portions of this press release, particularly those describing Reed’s goals and strategies, contain “forward-looking statements.” These forward-looking statements can generally be identified as such because the context of the statement will include words, such as “expects,” “should,” “believes,” “anticipates” or words of similar import. Similarly, statements that describe future plans, objectives or goals are also forward-looking statements. While Reed’s is working to achieve those goals and strategies, actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties. These risks and uncertainties include difficulty in marketing its products and services, maintaining and protecting brand recognition, the need for significant capital, dependence on third party distributors, dependence on third party brewers, increasing costs of fuel and freight, protection of intellectual property, competition and other factors, any of which could have an adverse effect on the business plans of Reed’s, its reputation in the industry or its expected financial return from operations and results of operations. In light of significant risks and uncertainties inherent in forward-looking statements included herein, the inclusion of such statements should not be regarded as a representation by Reed’s that they will achieve such forward-looking statements. For further details and a discussion of these and other risks and uncertainties, please see our most recent reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission, as they may be amended from time to time. Reed’s undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.

REED’S, INC.

CONDENSED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2012 and 2011

(Unaudited)

Three months ended March 31,

2012

2011

Sales

$

6,539,000

$

5,140,000

Cost of tangible goods sold

4,185,000

3,321,000

Cost of goods sold – idle capacity

369,000

402,000

Gross profit

1,985,000

1,417,000

Operating expenses:

Delivery and handling expenses

479,000

388,000

Selling and marketing expense

722,000

580,000

General and administrative expense

740,000

655,000

Total operating expenses

1,941,000

1,623,000

Income (loss) from operations

44,000

(206,000

)

Interest expense

(168,000

)

(159,000

)

Net loss

(124,000

)

(365,000

)

Preferred stock dividend

(9,000

)

(11,000

)

Net loss attributable to common stockholders

$

(133,000

)

$

(376,000

)

Loss per share available to common stockholders – basic and diluted

$

(0.01

)

$

(0.04

)

Weighted average number of shares outstanding – basic and diluted

10,921,076

10,619,242

MODIFIED EBITDA SCHEDULE

Three Months Ended March 31,

2012

2011

Net loss

$

(124,000

)

$

(365,000

)

Modified EBITDA adjustments:

Depreciation and amortization

183,000

144,000

Interest expense

168,000

159,000

Stock option compensation

26,000

50,000

Other stock compensation for services

15,000

43,000

Total EBITDA adjustments

392,000

396,000

Modified EBITDA income from operations

$

268,000

$

31,000

The Company defines modified EBITDA (a non-GAAP measurement) as net loss before interest, taxes, depreciation and amortization, and non-cash expense for securities. Other companies may calculate modified EBITDA differently. Management believes that the presentation of modified EBITDA provides a measure of performance that approximates cash flow before interest expense, and is meaningful to investors.

REED’S, INC.

CONDENSED BALANCE SHEETS

March 31, 2012

December 31, 2011

ASSETS

(unaudited)

Current assets:

Cash

$

101,000

$

713,000

Inventory

6,212,000

6,099,000

Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $135,000 and $135,000, respectively

2,090,000

1,626,000

Prepaid inventory

238,000

168,000

Prepaid and other current assets

150,000

123,000

Total Current Assets

8,791,000

8,729,000

Property and equipment, net of accumulated depreciation of $1,891,000 and $1,739,000, respectively